American Airlines Hits Back At United CEO Scott Kirby’s Billion Dollar Loss Claim — Chicago O’Hare Makes Money

United Airlines Scott Kirby has made various claims about how much money American Airlines is already losing at Chicago O’Hare as he’s sought to grow his own schedule in a money-losing way, figuring he could bleed American even more – and in classic antitrust dumping fashion push out competition and eventually raise his own prices.

• About $800 million a year on a run-rate basis in September 2025.

• About $500 million lost at O’Hare in 2025 which he contrasted with United making about $500 million there.

• Potentially $1 billion in 2026 as he sought to bury them.

I’ve cast significant doubt on the magnitude of these losses, while suggesting that American does lose money in Chicago today. My core point has been that (1) how you do the math, allocating costs to hub and credit card revenue, changes the picture significantly, while (2) Chicago relevance is critical for the success of American’s cobrand credit card which is how the airline actually makes its money.

American has been pretty quiet on the actual performance of the hub from their perspective, although at the end of January Chief Commercial Officer Nat Pieper elaborated on this point about the credit card.

At the J.P. Morgan Industrials Conference on Tuesday, American’s CFO Devon May finally answered the charges that they’re losing significant money at Chicago O’hare. He gives something of a technical answer, claiming that in the ways that matter for decision-making, Chicago O’Hare actually makes money. I’ll explain.

Sure. I’ll maybe take you back to some old managerial accounting and activity-based cost and systems. But American Airlines, along with every other airline and probably most companies when they’re looking at the profitability of a different product or a different factory, whatever it might be, it’s going to be looked at a handful of different levels. The first is how is your profitability against the direct operating costs associated with operating for us that hub or that flight. All of our hubs are profitable at that level. That’s a decision-making level.

Next is it covering the actual assets that are allocated to that hub. So in our case, it’s largely is it covering the cost of ownership. Not really a pure ROIC type review, but like a P&L type review inclusive of ownership. It does include costs that maybe are fixed or a little bit more fixed in the near term. So things like calendar-based maintenance expense, sorry, airport rent expense, which, in many cases, is fixed over a longer term. So you slide some of that into a fixed category. But in our case, when you account for some of these fixed costs, all of our hubs are profitable on an after ownership basis. That’s another decision-making tool.

The last one isn’t a decision-making metric at all, but it’s just there for interest. It’s there because people understand what pretax margin looks like. The way we run an activity-based costing system is effectively, it takes it down to a pretax level. And it’s because that’s a metric that people understand. Some companies might use more of an EBIT level for us, it’s a pretax level. All of that does, it allocates overhead. So it’s not necessarily that a hub or a market is driving overhead. It’s an overhead allocation. You can use it to rank hubs. You can use it because people understand the metric, but it’s not a decision-making tool.

So in a year like 2025, we have some hubs that don’t make money on a pretax basis. We have some hubs that make money on a pretax basis. But it’s not something that we’re basing or making decisions on because when we look at it on versus direct operating costs or direct operating costs, inclusive of ownership, everything contributes positively to the system.

Just one other note that flight profitability systems don’t take into account is the entire network effect. If you cancel a flight out of a spoke station or if you shrink a hub, in our case, we had a smaller hub in Chicago for many years, you have less of a customer proposition in the spoke station. As you grow it back, your customer proposition in that spoke station becomes better. That’s what we’re seeing in Chicago right now.

The last thing that these profitability systems don’t include is the impact to your co-brand program. If you’re much smaller in a city, it’s not necessarily a good thing for your co-brand program. It’s not reflective directly in most of your hub profitability. But it’s something that we look at when we’re looking through just at a really detailed level, what does a hub or what does a flight do for the profitability of the network. So we look at it at a lot of different levels. Every company does the same thing. All of our hubs contribute positively to our system profitability right now. But that’s the way we look at flight profit, and that’s how we think about it at a flight level or a hub level.

May argues that you’re using the wrong profit measure if you think O’Hare is a money loser. There are different ways to measure whether a hub makes money.

• Does flying at O’Hare cover the direct costs of operating there, including crews, fuel, airport handling, etc? He says Chicago covers those costs.

• Does it also cover the costs of the assets tied to that hub? That includes things like airport rent and ownership-related costs. He says yes, even after including those more fixed costs, Chicago is still profitable.

• Finally, after allocating corporate overhead, does it still show a pretax profit? Here you’d include a share of companywide overhead like headquarters expense and all central costs. Since American was basically break-even in 2025, it’s not surprising that not every hub passes this test.

May explains that fully allocated overhead isn’t how they make decisions. It’s somewhat artificial, getting assigned a bunch of costs it doesn’t really cause. So “losing money” depends on what you include.

If you look incrementally, “If we operate this hub, is it adding positive value?” Chicago O’Hare passes that test. If you look at fully allocated accounting profitability – “After assigning a slice of all corporate overhead to it, does it still show a pretax margin?” – then it does not.

Chicago covers its direct costs plus asset ownership costs, therefore it is economically helping the airline, even if a fully allocated pretax view might make it look weak. That’s all pretty standard. And once you allocate overhead, you can make almost anything look worse.

If Chicago generated $100 of contribution after local costs, then corporate accounting assigned it $120 of headquarters overhead, it “loses” $20 pretax. But shrinking Chicago wouldn’t actually eliminate that $120 of overhead. So the business wouldn’t be better off shrinking Chicago. Allocated overhead isn’t the same thing as profitability drag.

Then he adds two important points about hub profit metrics: network effects and credit card effects. If American shrinks Chicago, then passengers in smaller spoke cities have fewer useful connections. That weakens the whole network. That Chicago flight supports itinerary options, customer loyalty, and relevance in surrounding markets. And related to that, a smaller American in Chicago means fewer people there are likely to care about AAdvantage and its cobrand credit cards. Investing in Chicago means more cobrand card acquisition and spend.

That is an important point. It’s why the JetBlue partnership in New York mattered so much (relevance in the most important spend market in the country). It’s why their Alaska partnership was supposed to be so important, because American is weak in the Bay Area and Pacific Northwest. And it’s why American’s relative decline in New York and Los Angeles was such a mistake.

May is correct that in capital-intensive network businesses, fully allocated accounting profit is often a poor guide to operational decisions. To the extent that O’Hare covers variable costs, fixed ownership costs, strengthens the network, and supports loyalty revenue, then calling it a “money loser” is sloppy and wrong.

However, it’s also important what he does not say. He doesn’t claim O’Hare is earning an attractive return on capital, or outperforming other places they could invest. He isn’t saying adding flights in Chicago offers better economics than in Dallas, Charlotte, or Miami. O’Hare can be positive, while still an inferior use of aircraft and capital.